SC Administrative Law Court Decisions

The South Carolina Department of Revenue (DOR) seeks a monetary fine of $2,700 for a failure to post required penalty signs. Whitlark & Whitlark, Inc., d/b/a FCW Amusement, d/b/a RAC Amusement (Whitlark) opposes DOR's position and asserts the fine imposed is too severe for a first time offense. Whitlark's disagreement with DOR's determination places jurisdiction in the Administrative Law Judge Division (ALJD). S.C. Code Ann. § 12-4-30(D) (Supp. 1997); S.C. Code Ann. § 1-23-310 et seq. (Supp. 1997). The hearing in this matter was held January 22, 1998 at the Edgar Brown Building, Columbia, South Carolina. Based upon the evidence and the argument presented by the parties, a fine of $450 is imposed.

Did Whitlark fail to post notice of specific penalty statutes as required by S.C. Code Ann. § 12-21-2802 (Supp. 1997), and, if so, what fine is appropriate for such a failure?

1. Positions of Parties

DOR asserts no penalty signs were located above any of the nine machines at Whitlark's location and that a penalty of $300 for each violation results in a total fine of $2,700. Whitlark argues the fine is too severe given the technical nature of the violation and the fact that this violation is the first and only violation issued to Whitlark.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

1. On July 10, 1997, Whitlark operated nine Class III video game machines licensed under S.C. Code Ann. §12-21-2720 at 2721 Rosewood Dr., Columbia, South Carolina.
2. Whitlark is the business owner of the licensed establishment.
3. An inspection by South Carolina Law Enforcement Division (SLED) Agents on July 10, 1997 at Whitlark's location determined that of the nine machines at the 2721 Rosewood location, none prominently displayed signs giving notice that penalties would be imposed for tampering with machines, skimming proceeds, or manipulating the outcome of a machine.
4. After concluding the inspection, the SLED Agents issued to Whitlark's attendant a Preliminary Findings Report for Video Gaming setting forth the violations.
5. On August 21, 1997, DOR issued a citation to Whitlark for violating § 12-21-2802 and imposed a penalty of $2700.
6. The offense involved is the first offense of any type by Whitlark.
7. The signs were placed above the machines as soon as Whitlark became aware the signs were required.

3. Discussion

Class III machines licensed under either the Video Game Machines Act or Article 19 must have prominently displayed on the wall above the machine or affixed prominently to the machine a sign citing the penalties that are provided by §§ 12-21-2790, 12-21-2792, and 12-21-2794. S.C. Code Ann. §12-21-2802 (Supp. 1997). The facts here demonstrate the required signs were not displayed on the wall above the machines and were not affixed prominently to the nine machines in dispute.

A violation having occurred, the issue is what statute imposes a penalty for the violation and in what amount. A licensee becomes liable for a penalty when the licensee fails to comply with the statutory provisions related to the license being held. S.C. Code Ann. § 12-54-40(b)(3) (Supp. 1997). Here, Whitlark is responsible for obtaining licenses for the video poker machines. § 12-21-2720 (A)(3) (Supp. 1997). Further, Whitlark failed to comply with the requirement to post the penalty signs. S.C. Code Ann. § 12-21-2802 (Supp. 1997). Thus, a violation is established which invokes the penalty of § 12-54-40(b)(3) (Supp. 1997).

The penalty amount must be within a range of not less than fifty dollars nor more than five hundred dollars. S.C. Code Ann. § 12-54-40(b)(3) (Supp. 1997). When a penalty carries a range of possible fines, the fact-finder must determine the appropriate amount of the penalty after the parties have had an opportunity to be heard on the issues. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991). In deciding what penalty amount is appropriate, the weight and credibility assigned to evidentiary factors bearing on the issue are matters within the province of the trier of fact. See South Carolina Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992).

Here, DOR seeks a penalty of $300 for each violation. The offense is the first offense of any type by Whitlark. Further, the signs were put up as soon as Whitlark became aware the signs were required. Under the circumstances, I find that a more appropriate penalty is $50 for each violation of § 12-21-2802. Accordingly, a total fine of $450 must be assessed.

4. Conclusions of Law

Based upon the above Findings of Fact, I conclude as a matter of law, the following:

1. Machines authorized under § 12-21-2720(A)(3) are termed Class III machines.

2. Class III machines licensed under either the Video Game Machines Act or Article 19 must have prominently displayed on the wall above the machine or affixed prominently to the machine a sign citing the penalties that are provided by §§ 12-21-2790, 12-21-2792, and 12-21-2794. S.C. Code Ann. §12-21-2802 (Supp. 1997).

3. A licensee becomes liable for a penalty when the licensee fails to comply with the statutory provisions related to the license being held. S.C. Code Ann. § 12-54-40(b)(3) (Supp. 1997).

4. Whitlark is responsible for obtaining licenses for his video poker machines pursuant to § 12-21-2720 (A)(3) and the failure to comply with the provisions of § 12-21-2802 requires a fine. S.C. Code Ann. § 12-54-40(b)(3) (Supp. 1997).

5. For each failure to comply with the provisions of § 12-21-2802, the penalty must be within a range of not less than fifty dollars nor more than five hundred dollars. S.C. Code Ann. § 12-54-40(b)(3) (Supp. 1997).

6. When a penalty carries a range of possible fines, the fact-finder must determine the appropriate amount of the penalty after the parties have had an opportunity to be heard on the issues. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991).

7. In deciding what penalty amount is appropriate, the weight and credibility assigned to evidentiary factors bearing on the issue are matters within the province of the trier of fact. See South Carolina Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992).

8. Under the facts, an appropriate penalty is $50 for each violation of § 12-21-2802, for a total fine of $450.

Based upon the foregoing Findings of Fact and Conclusions of Law, DOR shall impose a fine of $450 against Whitlark for the violations of S.C. Code Ann. § 12-21-2802 (Supp. 1997).

AND IT IS SO ORDERED.

RAY N. STEVENS

Administrative Law Judge

This 11th day of February, 1998

Columbia, South Carolina